The psychological contract: why I quit my job and why it matters to you

A few years ago I resigned from an organisation I was happy in. I enjoyed the work, I had some great relationships with colleagues, and my salary was adequate.

I quit because I didn’t get a performance related pay rise for the first time in five years. I know, pay rises every year are unheard of in most organisations; hear me out on this one.

I have always prided myself on being a hard-working, high-performing employee – and in that job I generally was. The trouble arosse because I was near the top of my paygrade and the rules said that at this level it would usually take two years for an employee to reach the next pay increment.

This was the justification my manager gave for not awarding me the increase. But to me this meant that the exceptional work I had put in, that each year up until now had been rewarded in a (albeit small) pay increase, wasn’t good enough.

Of course there were other factors in my resignation – I didn’t get on with a new colleague I had to work with a lot; I’d realised that progression was about waiting for people to retire or die; and I was concerned about being pigeon-holed as too ‘public sector’ to be able to get back into the commercial world.

But the lack of a pay rise that was the final straw.

My psychological contract had been breached

So what was going on here? Although I didn’t know it at the time, the psychological contract I had with my employer had been broken.

The idea of the psychological contract was first developed in the 1960s but it wasn’t popularised until after the economic downturn of the 1990s. It’s a term used to describe the often unconscious and unspoken perceptions of what employers and employees expect of each other. Here are some examples of the psychological contract from an employer and employee point of view:

  • If I treat my team well they will not leave.
  • If I reward employees who come up with new ideas it will encourage innovative thinking.
  • If I work hard I will be promoted.
  • If I work extra hours now I will be able to take time when I need it for my children.

The psychological contract is very different from our legal contract of employment – and often unenforceable – but it can have much more of an impact on how we behave. For this reason it is important for us as employers to understand the concept and take account of it in our day to day management activities.

Here’s how:

  • Demonstrate fairness – make sure your employees know that their interests are taken into account when decisions are made and consult them about change.
  • Listen, communicate and build relationships – regular one-to-ones with your team will build relationships and offer you the opportunity to get to know more about the psychological contracts of your employees.
  • Manage expectations – it isn’t always possible to prevent a breach of a psychological contract, but being open about issues can help identify and address any issues.

My psychological contract

I believed that if I worked hard and performed well I would be rewarded, and this idea had been reinforced at annual appraisal for years. I also believed that performance would be rewarded with progression and that I had the right to be treated in a certain way by management and colleagues. Once all three aspects of my psychological contract had been broken, my commitment to the organisation vanished.

How about you? What is in your psychological contract?

Further reading

CIPD factsheet (available when you register for free)